Friday, December 3

There is a plan to end the semiconductor crisis: what it is and when will the end come according to chipmakers


The impact that the deficit of integrated circuits is having both in some industrial sectors and in the pockets of consumers is being devastating. The automotive, information technology and household appliances industries are three of those that have been affected in the most profound way due to their enormous dependence on semiconductor production, but they are not the only ones who are going through a difficult stage.

Consumers are the last link in the global value chain, so it is difficult for us to stay out of this crisis. In fact, we are currently paying a very important surcharge when we buy some products that have a very clear dependence on chip production. Graphics cards and video game consoles, which are two of the devices that are fueling speculation, exemplify very well the situation in which we find ourselves.

The semiconductor crisis is the result of a very deep imbalance between supply and demand for integrated circuits

This crisis is the result of a very deep imbalance between supply and demand for semiconductors. In the article that I link here we explain in detail what are the factors that have caused the demand for integrated circuits to have acquired its current size, but there are three that account for a large part of this responsibility and in which, for this reason, it deserves the pity we stop for a moment.

The increase in the number of chips in cars (both those with a heat engine and electric cars), the increase in demand for computer equipment triggered by the proliferation of teleworking and the maelstrom that surrounds to the hardware that allows cryptocurrency mining they are in all probability the fundamental ingredients of the recipe that has placed us in the situation in which we are. Fortunately, it has a solution.

There is only one solution to the imbalance between supply and demand: make more chips

The plan that semiconductor manufacturers have put in place to end this crisis does not propose any magic solution. Not even a slightly convoluted one. What it seeks is, simply, to increase the production of integrated circuits enough to respond not only to current demand, but also to the one that will be consolidated in the medium term. The problem is that the chip factories that are up and running have been around for many months. producing at the limit of its capacity (especially those of highly integrated semiconductors), so it is not possible to subject them to more stress.

Given the circumstances, it is clear that the only possible option is to build more factories and equip them with the photolithographic equipment required to produce state-of-the-art chips, but this process takes time. According to Ignacio Mártil de la Plaza, professor of Electronics at the Complutense University of Madrid and an accomplished semiconductor expert and photovoltaic solar energy, “a cutting-edge chip factory takes no less than four years to be fully operational.

Some of the main semiconductor manufacturers are already investing a good part of their resources in starting up new factories

This slap of reality strongly reflects that we have no margin to resolve this crisis in the short term. At least if we stick to the production of the highly integrated chips that are required, among others, by the telecommunications, professional and personal computing, and mobile phones industries. The good news is that some of the major semiconductor manufacturers are already investing much of their resources in start up new factories. In this context there is no risk: they know that they will sell all the chips they are capable of manufacturing even before they are produced.

At the end of last March Pat Gelsinger, Intel’s new CEO, announced that the company he runs will invest approximately $ 20 billion to set up two new factories on its campus in the town of Ocotillo, in Arizona (United States). This company has also shown interest in starting up a new integrated circuit factory in Europe that will contribute to the supply of our continent. It is not yet known in which country he will reside, although it sounds strongly that there are several states of the European Union very interested in this project and predisposed to welcome facilities of this type with open arms.

However, Intel is by no means the only chipmaker that has already started building new factories. TSMC, which is currently the largest producer of integrated circuits on the planet, has already started the works of a new factory in Arizona (United States) that will cost you 12 billion dollars. GlobalFoundries announced in mid-July that it will build a new factory in New York State that will allow you double your production capacity of integrated circuits. And Texas Instruments began construction of a new chip factory in Dallas (United States) that will cost 3.1 billion dollars, and has confirmed that it plans to build another one in the short term.

The beginning of the end of the crisis is still far away: it will not arrive before 2023

The semiconductor manufacturers that we have talked about in the last few paragraphs are just a few that are already building new chip factories, or planning to do so in the short term. Most of them are investing a lot of their resources to shorten the time required to start up these factories, but even so, the deadlines are what they are. TSMC has confirmed that your new Arizona factory will start chip production in 2024Therefore, in the short term, it will be difficult to increase its manufacturing capacity in order to respond to the growing demand for semiconductors.

TSMC has confirmed that its new Arizona factory will start chip production in 2024

The most optimistic forecast so far has come from Pat Gelsinger, Intel’s CEO. Perhaps because its new factories have been projected longer than those of some of its competitors. In any case, this executive predicted at the end of last April that the huge investment that is required to start up new integrated circuit factories and the time that must be invested in this process will cause the chip deficit lasts for two more years.

These statements invite us to assume that the crisis will last throughout 2022, and the outlook will possibly begin to improve slightly in 2023. At the moment none of the senior officials of the companies that manufacture integrated circuits has dared to predict precisely when they will achieve put an end to the imbalance that has placed us in this situation, but it is clear from your statements that the deficit will give its last blows in 2024. We have to wait, but, despite everything, if they really manage to solve a problem of this magnitude over the next two years, we will be facing a milestone from which the actors involved should draw some learning.

Cover Image | TSMC



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